Repayment Patterns Research Articles

Characterizing delinquency and understanding repayment patterns in Philippine microfinance loans

Characterizing delinquency and understanding repayment patterns in Philippine microfinance loans

Tax Shields, the Weighted Average Cost of Capital, and the Appropriate Discount Rate for a Project with a Finite Useful Life

The standard formulas for calculating the value of a firm’s tax shield and its weighted average cost of capital (WACC) use the assumption that the underlying cash flows are perpetuities. Yet, most projects will have a finite useful life. Because the perpetuity approach will overstate the value of a finite-life project’s tax shield, this factor will pressure the perpetuity-formula WACC to be less than the finite-life WACC. However, a large portion of the value of a perpetual tax shield can be attributed to interest payments during the next 5, 10, or 25 years, making it possible for the perpetuity-formula WACC to be greater than the finite-life WACC. Using a series of numerical examples, this paper shows that the finite-life WACC can be either higher or lower than the perpetuity-formula WACC depending on the project’s useful life, the required return on the unlevered project, the firm’s capital structure, the cost of debt, the marginal tax rate, and the debt repayment pattern (e.g., coupon bonds or amortizing loans). The analysis in this article helps managers better understand the potential biases introduced into the capital budgeting process when using the perpetuity-formula WACC to evaluate projects with finite useful lives.

A Study of Credit Card Holders’ Repayment Pattern with Reference to Chennai City

In today’s world, everyone would have limited access to credit. But this access is available to all through one of the most valuable financial instruments i.e., Credit Cards. Credit Card is a boon as well as a bane. It can make or destroy the person who is using it. The Important factor of a Credit Card is the repayment of dues on a stipulated period. The study focuses on various aspects of repayment - how much amount will they pay towards credit card dues, how will they arrange funds to repay the debt, etc. The period of study is 2 months with a sample size of 100 through a questionnaire. The study uses ANOVA and Chi-Square Tests to analyze the factors that influence repayment patterns. The study reveals that there is no significant relationship between spending money and repayment of dues on time.

Some inverse problem remarks of a continuous-in-time financial model in L^1([t_I,Theta_{max}

In the paper we are going to introduce an operator that is involved in the inverse problem of the continuous-in-time financial model. This framework is designed to be used in the finance for any organization and, in particular, for local communities. It allows to set out annual and multiyear budgets, with describing loan, reimbursement and interest payment schemes. We discuss this inverse problem in the space of integrable functions over R having a compact support. The concept of ill-posedness is examined in this space in order to obtain interesting and useful solutions. Then, we will give some remarks for not functionality of the model for a given Repayment Pattern Density γ, when this operator is not invertible in the space. Additionally, this inverse problem is illustrated in order to prove its ability to be used in a financial strategy.

BEHAVIORAL BIASES AND CREDIT CARD REPAYMENTS AMONG MALAYSIANS

Analyses done using the survey response of 451 credit cardholders in the northern region of West Malaysia have shown that credit cardholder repayment pattern differed based on their demographic profile. Specifically, the study found that credit cardholders who were younger and earned a lower income tended to make poorer repayment decisions. In contrast, those with higher academic qualifications tended to make better repayment decisions. Further analyses also revealed that behavioral biases were better at predicting those who made full payment of the outstanding balance and those who paid more than the minimum amount, but failed to predict those who only paid the minimum amount or less. In addition, it was found that overspending emerged as the strongest predictor which discriminated among the three repayment groups, followed by risk aversion, myopia and impulsiveness.

Agricultural Credit Utilization and Repayment by Farm Households in Tripura

The study was conducted in West Tripura district of Tripura to examine the utilization and repayment of farm loans obtained by borrowers based on a survey done in 2020.The development of agriculture depends on farmers receiving adequate and timely loans. Purposive multi-stage random sampling was used to pick 120 farmers and 20 lenders for a comprehensive investigation. The majority of the sample beneficiaries availed of crop loans (82.5%) as compared to allied activities loans (17.5%) and it was observed that marginal and small farmers diverted a portion of the loan as compared to medium farmers. The extent of repayment of loans by the medium farmers was higher than the small and marginal farmers. To improve the utilization and repayment pattern of credit by farm households, the Bank Field Officers need to conduct post-credit supervision to reduce credit diversion to unproductive uses and disbursement of the majority of the loan in kind form may be used.

A study of repayment behavior of farmers in India: With special reference to kisan credit card scheme

India is an agricultural country. Our farmers are always involved in agricultural activities to produce grain for themselves and also for others. Small farmers take loan for each every small requirement from sahukars and private credit company at higher rate of interest; Due to high rate of interest it becomes very difficult for them to repay the loan amount along with interest. As a result they lose their landholdings as well as their houses also. To solve this problem, Government introduced KCC, which provide loan to farmers at very low or zero rate of interest. Present study focuses on Repayment Behaviour of Kisan Credit Card holder Borrowers of Obedullaganj Block. The current study attempts to determine the Loan Repayment Pattern of KCC as seen by farmers. The study was conducted using a sample of 200 KCC holders in the Obedullaganj Block of Raisen district (M.P.). collected during the year 2020 to 2021. In the research area it was found that the average loan sanctioned by banks to KCC holders was 155770.37 per KCC holder every financial year. Results shows that 16 (32) percent of the total KCC borowers out of 100 (200) percent have closed their accounts by fully repaying the original amount plus interest. It was discovered that 39% of the respondents had paid their debt on time. Closed and regular accounts together, account for 55% of the total. This demonstrates the sample borrowers’ excellent repayment performance. In addition, irregular and default accounts for 34.5 percent and 10.5 percent of the total.

PLUS Borrowing in Texas: Repayment Expectations, Experience, and Hindsight by Minority-Serving Institution Status

After decades of college costs outpacing inflation, institutions of higher education have become less able to meet the full financial need of students (Clark, 2015) (Walizer, 2018). For families trying to fill this gap, the Federal Direct PLUS for parents (PLUS) has been an increasingly popular, but problematic, financing option. The program enables parents to incur substantially larger amounts of education debt than their college student children even though the parents, unlike their children, receive no direct economic returns on the investment. Eligibility for PLUS entails only a modest check for adverse credit, not a more thorough – and common – check of credit worthiness that reflects ability to repay the debt. Consequently, some parents with low credit scores may borrow more than they could reasonably be expected to repay, but lack some of the programmatic repayment options and protections available to student borrowers. And, because loan counseling is not mandatory for PLUS borrowers, some parents may be less informed than student borrowers. For these reasons, Trellis conducted a study of parent borrower repayment patterns and a qualitative analysis of parent perceptions of the loan process and its effect on other financial experiences. In particular, Trellis examined the experiences of parents whose children borrowed while at either an Historically Black College or University (HBCU) or a Hispanic Serving Institution (HSI) since these schools serve a higher proportion of students from low-income families who might have lower credit scores. Additionally, these minority serving institutions (MSIs) historically have been underfunded and, consequentially, often lack the financial strength to meet the full financial need of its students whose parents, in turn, become more reliant on PLUS loans to gain access to higher education for their children. This study found similarities and differences in borrowing experiences between MSI parents and Non-MSI parents.

Factors Affecting Malaysian Millennials in Paying Debt

The purpose of this research is to identify the causes that make Malaysian millennials or fresh graduates face difficulty in repaying their basic debts such as study loans, car loans or rental. Basically, debts can be viewed from different perspective. It can be negative or positive and it depends on the repayment pattern by the debtor itself. Therefore, as a smart millennial, they need to have a good financial knowledge in managing their wealth so that they won’t face any problems in the future. It is because, when they failed to plan, then it means that they will easily fall into bankruptcy and face financial crisis in daily life. Hence, some questions arise, on how fresh graduates manage their income in paying basic expenses such as electricity bills or rental. So, this study is focusing on investigating the factors that affect the ability of Malaysians fresh graduates in repaying debts. Questionnaire has been distributed and collected from 200 respondents which are among fresh graduates and this study tested the relationship between income, personal attitude, financial knowledge, heavy credit card spending, and high cost of living with the ability of fresh graduate in repay the debts.

A Case Study of MSMEs and their Credit Repayment Pattern

A Case Study of MSMEs and their Credit Repayment Pattern

Modelling alternative student loan schemes for Brazil

This paper simulates student loan schemes for Brazil. A copula approach is applied to simulate dynamic earnings paths for graduates. Repayment patterns are then simulated for time-based and income-contingent loan designs. The results show that the Brazilian time-based scheme involved unsustainable repayment burdens for many graduates and contributed to the scheme's high default rates. We also show that the new income-contingent scheme is also likely to involve high taxpayer subsidies. We consider alternative designs with different strengths and weaknesses but favour an income-contingent scheme with a loan fee, repayment rates at 50% of current income tax rates and an interest rate at the government's cost of borrowing upon graduation and above initial tax threshold. We conclude by emphasising that full involvement of the federal revenue system is more desirable than the present approach of employer withholding. This would increase the earnings base and reduce costs, which is important for Brazil's current precarious fiscal situation.

ATTRIBUTES OF ACADEMICIANS' CREDIT CARD USAGE BEHAVIORS IN MALAYSIA

In line with the advance in technology and the increasing demands for better services, the market for credit card has shown tremendous growth performance,. The genuine usage of credit card in the form of convenience has diverged to associate with overspending, irresponsibility, revolving liability and bankruptcy. This infers that the possession of credit cards has brought upon a change in consumers’ usage behaviors. Thus, this study aims to determine the academicians’ credit card usage behaviors in a private tertiary institution in Malaysia. The dependent variable is usage behavior and the independent variables that serve as attributes are personal attitude, spending and repayment patterns. Meanwhile, the moderating variable in this study is gender. Data obtained via questionnaire were keyed into Statistical Packages for Social Science (SPSS) version 22.0 to generate descriptive statistics such as the demographic profile of respondents and inferential analysis such as independent sample t-test, Pearson correlation and reliability test. The finding revealed that repayment patterns are the most significant attribute of academicians’ credit card usage behaviors. On the other hand, there are no differences in credit card usage behavior between male and female academicians. Outcome from this study enable the government and credit card companies to relook on the requirement of granting credit card by taking into consideration of the holder’s repayment ability. This enables to produce a financially healthier and educated society and also to reach to the younger generations’ positively through the influence of the academicians.

An Empirical Investigation on Credit Card Repayment Pattern of Academicians in Malaysia

The credit card market has witnessed tremendous growth resulting from a paradigm shift in technology. The genuine usage of credit cards as a form of convenience has diverged to overspending, irresponsibility, revolving liability and bankruptcy. This implies that possession of credit cards has brought about a change in users’ repayment behavior. Thus, this study aims to determine academicians’ credit card repayment pattern in a private tertiary institution in Malaysia. The dependent variable is the repayment pattern and the independent variables that serve as the attributes include personal attitude and spending pattern, while, gender and parenthood serve as the moderating variables. Findings revealed that personal attitude and spending pattern were important attributes in determining the repayment pattern among the academicians. Gender and parenthood were found to play a moderating role in the repayment pattern. Findings from this study is expected to facilitate the government and credit card companies to work towards nurturing a financially healthier and informed society, and also to each out positively to the younger generations through the influence of the academicians.

A Study on Acquisition, Use and Repayment Pattern of Kisan Credit Card Scheme in Himachal Pradesh

This micro-level study was conducted in Himachal Pradesh and is based on primary data collected from 50 Kisan Credit Card (KCC) beneficiary farmers (24 small, 13 medium and 13 large) and 30 non-KCC farmers selected randomly from 8 villages of Kangra district. The Kisan Credit Card (KCC) scheme has been initiated to simplify the procedure for acquisition and use of credit by the farmers and is expected to bring transformation in the rural credit structure and delivery mechanism. The average credit limit sanctioned for small, medium and large farms came out to be 21, 792, 50, 385 and 1, 20, 231, respectively and the average amount borrowed by these categories was 19, 083, 45, 885 and 99, 615, respectively. The logistic analysis revealed that likelihood of adoption of KCC scheme significantly increased with the increase in the size of land holding and area under vegetable crops while higher education level and increase in family income reduced the probability of adoption. The probability of regular repayment was also significantly enhanced with the increase in area under vegetables and total family income. Based on the findings of the study, the scheme was found to fulfill social welfare objective favouring the resource-poor farmers. However, need was expressed by the farmers for revising their credit limits keeping in view the rising input prices and to consider other factors besides land holding like the area under commercial crops, possession of dairy/sheep/goat herds and farm enterprises.

Incentives for Loan Repayments: Evidence from a Randomized Field Study

This field experiment tests an innovative approach for helping automobile loan borrowers make their loan payments on time. Borrowers were randomly assigned to a loan with an interest rate reduction after three on‐time payments; borrowers assigned to this loan show fewer late payments compared to a control group. While the financial incentive of the interest rate reduction was small, the offer of a rate reduction appears to result in borrowers attending to due dates. This result illustrates that lenders can use simple mechanisms to encourage more positive repayment patterns among borrowers with a history of late payments.

A Microfinance Program Targeting People Living with HIV in Uganda: Client Characteristics and Program Impact.

HIV has disproportionately affected economically vulnerable populations. HIV medical care, including antiretroviral therapy, successfully restores physical health but can be insufficient to achieve social and economic health. It may therefore be necessary to offer innovative economic support programs such as providing business training and microcredit tailored to people living with HIV/AIDS. However, microfinance institutions have shown reluctance to reach out to HIV-infected individuals, resulting in nongovernment and HIV care organizations providing these services. The authors investigate the baseline characteristics of a sample of medically stable clients in HIV care who are eligible for microcredit loans and evaluate their business and financial needs; the authors also analyze their repayment pattern and how their socioeconomic status changes after receipt of the program. The authors find that there is a significant unmet need for business capital for the sample under investigation, pointing toward the potentially beneficial role of providing microfinance and business training for clients in HIV care. HIV clients participating in the loans show high rates of repayment, and significant increases in (disposable) income, as well as profits and savings. The authors therefore encourage other HIV care providers to consider providing their clients with such loans.

Modelling repayment patterns in the collections process for unsecured consumer debt: A case study

One approach to modelling Loss Given Default (LGD), the percentage of the defaulted amount of a loan that a lender will eventually lose is to model the collections process. This is particularly relevant for unsecured consumer loans where LGD depends both on a defaulter's ability and willingness to repay and the lender's collection strategy. When repaying such defaulted loans, defaulters tend to oscillate between repayment sequences where the borrower is repaying every period and non-repayment sequences where the borrower is not repaying in any period. This paper develops two models – one a Markov chain approach and the other a hazard rate approach to model such payment patterns of debtors. It also looks at simplifications of the models where one assumes that after a few repayment and non-repayment sequences the parameters of the model are fixed for the remaining payment and non-payment sequences. One advantage of these approaches is that they show the impact of different write-off strategies. The models are applied to a real case study and the LGD for that portfolio is calculated under different write-off strategies and compared with the actual LGD results.

Retail Credit Default Risk An Empirical Study

This study empirically examines the role of various socio -demographic and financial factors that determine borrowers default risk in housing loans. Using the data from the housing loan accounts (sanctioned from 1999-2010) of two public sector banks in Bangalore, the study investigates the repayment pattern of two groups of borrowers: defaulters and non-defaulters and group them into different risk level. The study uses stepwise regression to find the extent of influence of socio demographic and financial factors on default risk. The outcome of the study indicates that the association of financial variables like Net worth, Income, maturity and loan size are more significant on borrower default risk. However, one cannot ignore the sociodemographic variables like age, educational level, Number of dependents and experience in the job which otherwise may inhibit lender to properly assess credit risk in developing the internal score sheets. The outcome of the study shows that these parameters also act as default triggers.

NEW EVIDENCE ON CREDIT CARD BORROWING AND REPAYMENT PATTERNS

A new dataset allows researchers to examine patterns of credit card use for both borrowing and payoff. This article addresses changes in these behaviors for different birth cohorts by estimating cohort‐adjusted age profiles for debt and payoff rates based on a time series of cross sections. Younger consumers are found to be borrowing more heavily and repaying at lower rates than older generations. The accumulation of credit card debt is found to continue over the lifecycle. This has implications for recent changes in laws governing the credit card industry. Increases in minimum required payment rates are examined and are found to increase actual payoff rates more than proportionately. (JEL D12)

BG Banks Prepayment Model

In this paper BG Banks Danish MBB Prepayment modeling approach are being specified, estimated and validated.Prepayment modeling is not an exact science, like all model building it is a question of selection the most important factors that describe the evolution in the dependent variable - in this case the re-payment.When specifying our model, we decided to focus on the most important variables and the mechanism that underlies the prepayment behaviour - given our hypothesis. We defined this mathematically and estimated the unknown parameter vector - with the goal - of obtaining intuitive parameter values that supported our initial hypothesis regarding the nature of prepayment behaviour. In the paper it is shown that - as a general rule - our hypothesis about prepayment behaviour was supported. Furthermore, we obtained a degree-of-explanation equal to 79 for the estimation period 1995-2000.All in all we are very pleased with the obtained results. First of all they are intuive and secondly, the model gives a (very) satisfactory description of the actual historical re-payment pattern.